The passage of legislation currently in Congress would encourage more private insurers to write flood insurance, A.M. Best believes.
In a new special report, the ratings agency considers the Flood Insurance Market Parity and Modernization Act, which passed the House of Representatives this spring and awaits consideration in the Senate. The legislation clarifies that privately issued flood insurance policies from the excess and surplus lines market meet the federal requirement for homes purchased through federally-backed mortgages.
A.M. Best believes that through this bill, the current private flood insurance market would grow and become a more viable option for property owners and renters in need of or desirous of coverage.
“Over the past 25 years, the number of NFIP policies in force has more than doubled to more than 5.38 million,” the agency said in a news release. “This demonstrates the increasing need and interest in protecting US properties from risk of flooding as more information has become available about the susceptibility of certain communities to flood from revised flood maps and other territorial reassessments.”
A.M. Best added that given recent heavy losses that have added to the NFIP’s debt, it is clear that relying only on federally subsidized plans in “insufficient.”
“The NFIP was not designed to accommodate major catastrophes,” the group said. “However, federal taxpayers are shouldering the substantial burden of the program’s deficit, largely attributable to losses from Hurricanes Katrina, Rita and Wilma in 2005, and Superstorm Sandy in 2012.”
The passage of the flood insurance legislation, then, is a “big step in the right direction” for a more robust, affordable market for flood insurance.
